2014 Index of Economic Freedom

Taiwan

overall score73.9
world rank17
Rule of Law

Property Rights70.0

Freedom From Corruption59.7

Limited Government

Government Spending84.7

Fiscal Freedom80.3

Regulatory Efficiency

Business Freedom93.9

Labor Freedom53.1

Monetary Freedom81.7

Open Markets

Trade Freedom85.8

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 23.3 million
  • GDP (PPP):
    • $903.5 billion
    • 1.3% growth
    • 2.9% 5-year compound annual growth
    • $38,749 per capita
  • Unemployment:
    • 4.2%
  • Inflation (CPI):
    • 1.9%
  • FDI Inflow:
    • $3.2 billion
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Taiwan’s economic freedom score is 73.9, making its economy the 17th freest in the 2014 Index. Its score is 1.2 points higher than last year, with significant improvements in financial freedom and investment freedom outweighing small declines in six of the 10 economic freedoms including freedom from corruption. Taiwan is ranked 5th out of 42 economies in the Asia–Pacific region, and its overall score is higher than the world average.

Over the 20-year history of the Index, Taiwan’s economy has generally been rated “mostly free” with an economic freedom score hovering near 70 points. Market openness, measured through trade freedom, investment freedom, and financial freedom, has improved by 10 points or more. Taiwan has recorded uninterrupted advancements in economic freedom since 2009 and continues to be ranked one of the world’s 20 freest economies.

Taiwan has maintained well-developed legal and commercial infrastructure in the private sector. The corporate tax rate has become more competitive, and small and medium-size enterprises continue to be the backbone of economic dynamism. The level of state involvement in the economy remains considerable, but government spending is under control.

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Background

Taiwan is a dynamic multi-party democracy. President Ma Ying-jeou, re-elected in 2012 on a platform that promised economic revitalization and a more open economic relationship with China, has relaxed cross-Strait barriers and negotiated a multi-stage formal economic agreement with the mainland. Taiwan remains excluded from membership in the United Nations, other international organizations, and a variety of free trade arrangements as a result of Beijing’s efforts to pressure it into unification. Although internal opposition to engaging with China is considerable because of fears that sovereignty will be lost, recent economic arrangements bind the island closer to the PRC. With emphasis on services and high-technology manufacturing, Taiwan’s economy is one of the richest in Asia.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 59.7 Create a Graph using this measurement

Corruption remains a problem, though significantly less pervasive than in the past, and politics and big business are closely intertwined. The judiciary is independent, and the court system is free of political interference. A new law enacted in July 2012 established a rating and removal system to address concerns about corrupt or incompetent judges. Property rights are generally protected, and the judiciary enforces contracts effectively.

Limited GovernmentView Methodology

The top individual income tax rate is 40 percent, and the top corporate tax rate is 17 percent. Other taxes include a value-added tax (VAT) and an interest tax. The overall tax burden amounts to 8.8 percent of gross domestic income. Government spending accounts for 23 percent of GDP, and public debt remains steady at about 40 percent of the gross domestic economy.

Regulatory EfficiencyView Methodology

It takes three procedures on average to start a company, and no minimum capital is required. However, licensing requirements remain relatively time-consuming and take over three months on average to complete. Bankruptcy proceedings are fairly easy and straightforward. The labor market lacks flexibility. Prices are market-determined for the most part, but the government does influence some prices (for example, through fluctuating fuel subsidies).

Open MarketsView Methodology

The average tariff rate is 2.1 percent. Tariff-rate quotas are imposed on some categories of imports. New foreign investment may be screened by the government, and investment in some sectors of the economy is subject to limits. The financial sector, dominated by banking, has gradually become more competitive, although it is subject to state interference. A variety of financial instruments are available to investors on market terms.

Country's Score Over Time

Bar Graph of Taiwan Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Taiwan to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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